Generic-Drug Stocks Still Under the Weather
An outbreak of Big Pharma flu has struck the generic-drug industry, causing sickening returns for investors who had been counting on these defensive investments during economic uncertainty.
Shares of most major generic-drugmakers have traded below the S&P 500 for the 12 months ended May 23, and that index was off nearly 10%.
In addition, several generic-drug makers have performed below an index of large-drug companies, and that's a big target to miss. The Amex Pharmaceutical Index is down 19%.
Among the prominent players, the exception to the malaise is Teva Pharmaceutical Industries (TEVA), the world's largest generic-drug company. Teva's shares are up 13% for the past 12 months. Its market capitalization of $35 billion is nearly triple the combined market caps of other independent competitors cited in this article.The world's second largest generic-drugmaker is the Sandoz division of Novartis (NVS). Although the generic-drugs business is an intense, commodity-like affair, current economic conditions and today's drug-industry environment should, in theory, prompt cheers from investors in the group. Major brand-name drugs keep losing patent protection, and an expensive flood of patent expirations should occur during the 2010-2012 period. A U.S. Supreme Court ruling last year on patent-protection in a nonpharmaceutical case could help the generic-drug industry by making it easier for generic-drug makers to challenge certain patents. Meanwhile, managed care firms keep pressuring doctors and consumers to choose generics over brand-name drugs. The eroding economy has reinforced consumers' efforts to save money on medications.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV